Fitch: Subprime Late-Pays Fall

With serious delinquencies up for the 34th consecutive month, U.S. prime residential mortgage-backed security (RMBS) late-pays have now eclipsed 10%, according to Fitch Ratings in the latest edition of its Performance Metrics report. Conversely, subprime delinquencies fell for the first time in nearly four years.

Since beginning to rise in the second quarter of 2007, prime RMBS loan delinquencies nearly tripled in 2009 and are already up 90 basis points (bps) this year. Overall, prime jumbo RMBS 60+ day delinquencies rose to 10.1% for March – up from 9.9% for February and 4.8% a year ago.

Roll rates also increased to their highest-ever level (1.4%) in the Fitch report's history.

Subprime RMBS delinquencies fell to 46.3% in March from 46.9% the prior month, but remained well above the 39.8% of a year ago. Subprime delinquencies rose dramatically for 44 months from a low point of 6.2% in June 2006. The roll rate for March fell to 4.5% from 5.4% the prior month and was well below the trailing 12-month average of 5.7%.

‘The improvement in subprime delinquencies may be nothing more than a seasonal anomaly of tax refunds being utilized to help borrowers catch up on late mortgage payments,’ Barberio adds. ‘Nonetheless, March roll rates fell significantly from last month and are now at their lowest level in over two years.’

An increase in loan modification activity also contributed favorably to the performance measures.

California prime jumbo loan performance continued to weaken in March, with 60+ days delinquencies rising to 11.8% from 11.6% in February (and 5.4% in March 2009). During the first quarter of this year, Florida had the biggest jump (1.5%) of the five states with the highest volume of jumbo loans outstanding. New Jersey was second of the five states, with a 1.1% increase over the same period.

The five states with the highest volume of prime jumbo loans outstanding – California, New York, Florida, Virginia and New Jersey – combined represent approximately two-thirds of the total sector. Prime jumbo RMBS 60+ day delinquencies for these states in March, compared to the prior month, and their approximate share of the estimated $371 billion market, are as follows:

California: 11.8% – up from 11.6% (44% share of the market);

New York: 6.7% – up from 6.3% (7% share);

Florida: 17.5% – up from 17% (6% share);

Virginia: 5.8% – up from 5.7% (5% share); and

New Jersey: 8.2% – up from 7.9% (4% share).

Fitch's RMBS Performance Metrics combines loan-level data from Fitch Ratings and LoanPerformance to include delinquency trends, roll-rate movement and loss rates across vintage, sector, and mortgage type. The report also includes data on mortgage servicing trends, such as modification activity and advancing percentages, as well as a summary of bond-rating changes.